particlemn

There is a middle man who seems to be forgotten in these discussions, CVS does not negotiate with each individual gift card issuer, they get a package deal from a distributer who probably also pays rent to CVS for space on an end cap. each person who buys a starbucks or outback gift card at cvs is subsidizing my purchase of visa gift cards. cvs corp. probably analysis the gift card suite for profitability, and having a large offering makes items more enticing. and simplicity tend many customers to buying high profit gift cards, so your average shopper want to buy a $25 gift card for someone, they goto cvs and see the visa has a 4.95 fee so it would cost them 29.95 and they say that's a rip off ill get them an outback one that only costs 25 to get 25. that outback one probably has a high profit(look how Costco can sell 100 gift cards for 80). hence the suite of gift cards makes money for CVS. if they have a small selection not as many people will buy there so adding in some cards that break even or lose can still be a money maker.

Hbax

Can't speak to CVS specifically, but I just accidentally got some insight into this metric in regards to 7-11.

I cyclically purchase OVs from a 7-11 because it codes as gas. When I stopped in today, they were all out. The cashier noticed me searching, and asked what I was looking for. When I said OVs, she said to wait, that they were doing some remodeling and she would check in the back to see if any more had come in yet. I mentioned that I didn't know whether all the cards were restocked by somebody from the outside or by the 7-11 employees. She said "some of each".

So clearly the Vs are handled internally and not by an outside distributor. Perhaps an outsider handles the phone cards.

jonnydoe1234

For Visa/MC gift cards, I believe that the merchant does indeed get them at a slight discount and gets some or all of the purchase fee. The bank issuing the card is mostly dependent on swipe fees, as well as leftover money on the cards that goes unused, to make the cards profitable.

Reload cards are a much dicier proposition for merchants, which is why they are are frequently only sold by cash. There are no swipe fees, and pretty much everyone drains the entire balance immediately (for vanillas, there is no way to use only part of the balance if I recall correctly, though you can do so for reloadits), so the bank issuing the reload can't make money off swipe fees or off unused balances. Thus, the bank can't really give the merchant much money for each sale (maybe a couple dollars), and the merchant would therefore likely be losing significant money by taking credit cards for the purchase of the reload, even with extremely favorable processing fees from the credit card company.

AdamAlias

I posted this some months ago:

Bought a VR today and the cashier showed me the store's activation receipt.

Total: $503.95
Cost: $502.45
Commission: $1.50

Bikeguy

Wonder if the swipe fees and remainder are negotiated with the companies on which the VRs are loaded.